Early Retirement of Bonds Elston Company issued $500.000 of eight percent, 20-ye

Question

Early Retirement of Bonds Elston Company issued $500.000 of eight percent, 20-year bonds at 106 on January 1. 2010. Interest is payable semiannually on july 1 and January 1. Through January 1. 2016. Elston amortized $5.000 of the bond premium. On January 1. 2016. Elston retired the bonds at 103 (after making the interest payment on that date). Prepare the journal entry to record the bond retirement on January 1,2016. General Journal Date Description Debit Credit Jan.1 Bonds Payable Cash To retire bonds and record gain on bond retirement.

Explanation / Answer

IN THE BOOKS OF ELSTON COMPANY: DATE ACCOUNTS TITLE AND EXPLANATION DEBIT $ CREDIT$ Jan 1 2010 Bonds Payable Dr. 500,000 Premium on Bonds payable Dr. 25000       Gain on retirement of bonds 10,000      Cash Account (5000*103) 515000 Note: Total premium: (5000*6) 30000 Less: Amortized 5000 Unamortized balance in Premium 25000

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